By Pritu Makan
The FNB ETN provides investors with ZAR-denominated exposure to the MSCI World Ex USA Index which is a free-float weighted
equity index. The index measures global equity performance outside the United States (US), covering 773 large and mid-cap
companies across 22 (of 23) developed markets. This benchmark, which covers approximately 85% of the free float-adjusted
market capitalisation in each country, is widely used by investors seeking international diversification- without the regional
concentration of the dominant US equity market.
Investment strategy
The MSCI World Ex USA Index helps investors balance portfolios against US-centric risks by reducing reliance on US equities and
gaining exposure to a diversified basket of developed market equities across financials and industrials to healthcare, technology,
and consumer staples.
Advantages
- The MSCI Ex USA Index offers investors global diversification benefits excluding US concentration risk. Standard global indexes are heavily dominated by the US, with the S&P 500 making up over 60% of the MSCI World Index. As such, this index limits exposure to a single country's economic shocks or regulatory changes by excluding the US entirely.
- The benchmark also offers investors sector balance as it tilts towards financials, healthcare, and consumer staples, compared to the tech-heavy US market. This exposure helps smooth portfolio performance when tech underperforms.
- Another key benefit is currency diversification as the index is exposed to major global currencies such as the euro, Japanese yen, British pound and Swiss franc. This allows the portfolio to benefit directly from periods of US dollar weakness.
- The index provides direct exposure to world-class global giants that are missed entirely by US-only funds, such as ASML (semiconductors), Nestlé (consumer goods), Toyota (automotive), and LVMH (luxury goods).
Risks
- Geopolitical tensions are key risks to the index. Broad exposure across Europe and the Asia Pacific introduces increased vulnerability to regional political instability, trade disputes, and regulatory changes. Localised energy supply shocks can directly negatively affect company margins.
- Being structurally underweight high-growth technology platforms means that the MSCI Ex USA Index faces performance drag during tech-driven bull markets.
- While multicurrency exposure can act as a tailwind, a strong prolonged dollar cycle creates direct translation losses.
FNB Stockbroking and Portfolio Management View
- This ETN provides investors with a low-cost option to gain exposure to a broad spectrum of mature global economies outside the US.
- From a performance perspective, the MSCI World Ex USA Index has delivered a double-digit return (27%) over a trailing 12-month period to April 2026. It has outperformed the MSCI World Index on a year-to-date (YTD) basis.
- The Index offers a hedge against the elevated domestic fiscal and political volatility within the US. As global central banks and large international investors move away from relying solely on the US dollar, more institutional money is flowing into other major global markets. This benchmark is perfectly positioned to capture those inflows, helping to support non-US trade and keep foreign currencies stable.
The FNB ETNs
FNB has a range of locally listed exchange-traded notes (ETNs) that track the performance of globally listed shares,
indices and funds. For example, FNB's Netflix ETNs (NFETNC and NFETNQ) track the performance of the US listed Netflix
share through an instrument listed on the JSE. If the Netflix share price increases so will the price of the local FNB Netflix
ETNs. By investing in the FNB Netflix ETNs you benefit from the movement of the global Netflix share without having to
take your money offshore or having to spend a large amount of money to buy a single share.
